Flash Sale Sites Have Hit A Wall

Reality is sinking in for flash sale sites like ideeli, MyHabit, and Rue La La. The sites are reaching the end of their growth trajectory and will have to start consolidating soon, Sharon Edelson at Women’s Wear Daily reported.

The sites, which offer different designer labels at close-out prices, were once touted as viable competition for eBay and Amazon.

The vast majority of online shoppers don’t use the sites. While 85 per cent of shoppers browse for apparel online, only 3 per cent have used a flash-sale site.

“It’s definitely a viable concept,” Martin Zagorsek, chief executive officer of consultancy Launch Collective, told WWD. “But the format is not a game changer. It’s a great idea, but not nearly as big as all the start-ups and venture capitalists thought.”

The biggest problem facing flash sale sites right now is securing the right inventory, according to Edelson. As technology becomes more advanced, retailers have fewer surplus merchandise. That means that flash-sale sites have trouble getting the best designer labels.

“It lost a lot of its glamour and caused people to worry about the sustainability of the model, but it has managed to hang on,” Yoni Yadgaran, an analyst at Wedbush Securities, told Barr. “It’s reached an equilibrium and the largest survivors are benefiting.”